CO District Court Issues Separate Judgments of Guilt and Acquittal in “Pump and Dump” Stock Suit

Holding:

The U.S. District Court for the District Court of Colorado has issued a judgment of guilt against Jonathan Curshen, and found him liable for securities fraud for acting as a promoter in an internet "pump and dump" scheme. This type of scheme involved artificially pushing up the price and volume levels of a company’s shares on a stock exchange through various devices (the “pump”), and then selling these stocks for a profit (the “dump”). Here, the district court found after bench trial conducted on April 30 and May 1, 2009 that in early 2000, Curshen knowingly or recklessly posted on various Internet sites baseless projections and other financial information about Freedom Golf Corporation (“Freedom”), a now-defunct Denver-based golf club manufacturer. In a separate order, the district court entered an amended judgment dismissing the complaint against Timothy J. Miles, a principal shareholder of Freedom, finding him not liable for securities fraud after a bench trial held on June 20 and 21, 2005. The district court dismissed the complaint against Miles with prejudice after concluding plaintiff Securities and Exchange Commission (“SEC”) failed to prove that false statements Miles made were material to investors.

Detailed Summary:

The SEC’s complaint alleged that in the fall of 1999, Miles provided a broker-dealer with false information to be filed with the National Association of Securities Dealers (“NASD”), now called Financial Industry Regulatory Authority (“FINRA”), in order to initiate public trading of securities issued by Freedom’s predecessor company.

The complaint also alleged that from late January through early March 2000, Miles paid two stock promoters, Carter Allen Jones, including his company C. Jones & Company (“C. Jones”) and Curshen, to hype Freedom through the internet, telephone, and mail. Specifically, the complaint stated that Jones arranged for the dissemination of between 25…

More Updates